An independent Scotland will not be able to use the pound as its currency, Britain’s finance minister George Osborne warned on Thursday, seven months before Scots vote on a referendum which could end their 307-year union with the UK.

"If Scotland walks away from the UK, it walks away from the
UK pound,” Osborne said at a speech in Edinburgh on
Thursday, in his boldest attempt to keep Scotland from leaving
the UK. The Chancellor said a currency union was
“unlikely” and would be “extremely difficult”.

"The pound is one of the oldest and most successful
currencies in the world," he said.

Britain has been ramping up its campaign to keep Scotland from
becoming independent, and keeping the United Kingdom a cohesive
economic unit. Britain sees more economic benefit in a bigger
country and Prime Minister Cameron has said the separatist
movement is very “personal” as he himself has deep
Scottish roots.

"Nothing could be more damaging to economic security here in
Scotland than dividing our United Kingdom,” Osborne said.
Osborne has the support from Labour and Liberal Democrat party
heads Ed Balls and Danny Alexander, an unlikely unifying alliance
at Westminster

On September 18, four million people in Scotland over the age of
16 go to the polls and vote on independence. The breakaway
movement is led by the Scottish National Party (SNP) and
spearheaded by First Minister Alex Salmond.

Britain has recently experienced a burst in economic growth, and
the economy is now growing at its fastest since 2007. The Bank of
England expects unemployment to fall to 7 percent by the spring.
Economic outlook for 2014 is overall positive with an IMF
forecast of 2.4 percent growth– higher than any other European
economy.

The independence movement argues separation would be better for
Scotland because they believe it would provide a fairer balance
between taxes and spending. Nationalists also want a fair share
of North Sea oil, which lies under Scottish waters but is
extracted and operated by the UK.

Scotland’s road to independence has been weighed down by one very
fundamental question: on which currency will the economy run? If
the UK sticks to Osborne’s statement, then Scotland is left with
three options: introduce their own currency, introduce a currency
pegged to sterling, or join the euro, an option the SNP has
already ruled out.

Scotland’s ‘Royal’ bank

A new Edinburgh government would mean a total economic reshuffle
of banks, debt, taxes, and currency.

Scotland has produced an after independence plan,
but the blueprint has been rebuffed by Prime Minister Cameron
because it doesn't outline fiscal sustainability, or a future
currency plan.

Investors will be most interested in the fate of Royal Bank of
Scotland (RBS), one of the world’s largest banks before the 2008
crisis, and founded in Edinburgh in 1727. There have been rumors
generated by comments from top managers at the bank it would move
its headquarters to London in the case of a ‘yes’ vote, but
nothing has been confirmed.

In 2008, the British government bailed out RBS, as well as HBOS,
the nation’s two largest banks.

The Treasury expects an independent Scotland would settle its
share of government debt, as well as directly reimburse the rest
of the UK. This will have to be negotiated with a new Edinburgh
government.

In January the UK Treasury confirmed it will take on the full
responsibility for government debt if Scotland votes for
independence in September.